) recently announced its intention to commence a tender offer to
acquire the outstanding shares of
Human Genome Sciences, Inc.
) for a cash payment of $13 per share. Glaxo decided that it will
not take part in the strategic review being conducted by Human
We note that the tender offer will remain open for 20 business
days after its commencement. According to Glaxo, its offer provides
Human Genome shareholders with the option to make their own
decision and Human Genome's board enough time to consider other
In response to Glaxo's announcement, Human Genome has advised
its shareholders to take no action until the company's board
completes the review of the takeover bid. Human Genome plans to
complete the review process within 10 business days from the
commencement of the tender offer.
Earlier, in April 2012, Glaxo had made an offer to acquire Human
Genome for $13 per share in cash. However, Human Genome's board of
directors had rejected the offer as they believed that the offer
price undervalued the company.
If Glaxo succeeds in acquiring Human Genome, Glaxo would gain
full control over Benlysta (approved for treating systemic lupus
erythematosus). Glaxo will also gain control over late-stage
candidates such as darapladib (cardiovascular disease) and
albiglutide (type II diabetes).
Benlysta has significant potential, being the first lupus drug
to hit the market in more than 50 years. It was approved in
the U.S. in March 2011, while E.U. approval came in July 2011.
However, the product has performed below expectations since launch.
Glaxo recorded sales of $14 million in the first quarter of
The acquisition will raise the returns on Research and
Development (R&D) expenses for Glaxo and lead to cost synergies
of minimum $200 million by 2015. We believe this potential takeover
would be accretive for the company from 2013.
Human Genome shareholders also stand to benefit from the
acquisition, as the offer price represents an 81% premium over
Human Genome's closing share price on April 18, 2012.
We currently have a Neutral recommendation on Glaxo. The stock
carries a Zacks #3 Rank (Hold rating) in the short run.
GLAXOSMITHKLINE (GSK): Free Stock Analysis
HUMAN GENOME (HGSI): Free Stock Analysis Report
To read this article on Zacks.com click here.